How to get a business loan guide

So, your dishwasher decided it’s retiring early. Or maybe your boutique’s cash register just staged a full-blown rebellion.

Let’s pause right there. Those moments - the unexpected curveballs - can be the tipping point for a small business. 82% of small businesses fail because of cash flow problems. Not competition. Not a bad product. Cash flow.

We've seen it too many times. A brilliant entrepreneur, an incredible vision, but one financial hiccup later, the dream crumbles. Why? Because in the fast-paced, cutthroat world of business, cash isn’t just king, it’s survival.

Now, here’s the good news. For those who know how to play the game, a business bank loan can be more than a lifeline. It can be the catalyst that turns a crisis into an opportunity, whether that’s upgrading your equipment, expanding your reach, or simply keeping the lights on. But let us tell you this: securing that funding isn’t about luck or chance. It’s about strategy, preparation, and understanding the system.

Today, we’re here to give you the blueprint. Let’s talk about what you need to know to get the capital your business deserves and make sure you’re not just another statistic.

1. Decide what type of business loan you need

Now, loans come in all shapes and sizes. So, your very first step is deciding what kind of loan you actually need. There's a few factors that'll help you make this decision including:

• The loan amount: How much cash are you looking for? Is it a big chunk or are you looking for smaller, flexible amounts to manage day-to-day expenses?

• Purpose of the loan: What’s the money for? Whether it’s a new piece of equipment, a renovation, or just smoothing out cash flow, different loans cater to different needs.

• Repayment terms: How quickly can you pay it back? Some loans have fixed repayment periods, while business lines of credit offer more flexibility. Make sure you pick a loan that matches your ability to repay.

• Interest Rates: The cost of borrowing can vary. Small Business Administration (SBA) loans, for example, often have lower rates, but we'll get onto this a little more in the next section.

So, take a moment to consider these factors and match them to the type of loan that fits your business's needs. Once you’ve got a handle on them, you can start looking at the types of loans that might fit your needs. These include:

Term loans

These are the “Big Cash Infusion” option and are also referred to as traditional business loans. If you’ve got a major project or need a large sum for something like a new restaurant space or a full-blown renovation, term loans are your go-to. They’re designed to cover individual expenses and are repaid over a set period, usually five years or more. Interest rates typically range from 8% to 30%, depending on the lender and your business’s financial health.

You can get term loans from most banks and online lenders. How much you can borrow will depend on your industry, what you need the loan for, and your business’s financial status. These loans can be secured (backed by something valuable like property) or unsecured (no collateral required), and you can use them for stuff like buying new gear or expanding your business. 

Pros:

• Easy to find from a traditional bank and online lenders

• Covers a range of business expenses

Cons:

• Many lenders want high business revenue and a personal guarantee (a promise that you’ll pay if your business can’t)

• Startups and newer businesses might face steeper interest rates

SBA loans

A small business loan, AKA SBA loans or SBA guaranteed loans, are backed by the US Small Business Administration, and are like the VIP pass of business loans. Small business loans are super popular because they come with some great perks and various programs to fit different needs.

• 7(a) loans: These are your go-to if you need working capital up to $5 million. Depending on the amount and lender, 7(a) loans can be secured (backed by something valuable) or unsecured (no collateral needed) so this is a very common SBA loan to have.

• Microloans: Need a little cash for expansion or growth? Microloans let you borrow up to $50,000 for those smaller-scale needs.

• 504 loans: Perfect for big-ticket items like commercial real estate or equipment. These loans are secured by property, so you’ll need to put up some kind of asset.

Pros:

• Backed by the SBA and available through lenders nationwide

• Competitive interest rates for different loan programs

• Open to startups and borrowers with bad credit

• Supports underserved communities

Cons:

• The application process can be lengthy

• It takes longer to receive funds compared to some other loans

Business lines of credit

Lines of credit are kind of like business credit cards, but with a bigger punch. They're great for covering larger expenses than what a typical credit card can handle. With a business credit line loan, you get a higher funding limit, making it perfect for those midsize expenses that don’t fit neatly into your usual budget.

How it works is that you get a credit limit and a draw period, basically a time frame during which you can borrow money. You’re then able to borrow, repay, and borrow again as many times as you need within that period. This makes it super handy for covering cash flow gaps, especially if your revenue is a bit unpredictable but you still have bills to pay.

Some lenders might only require you to pay interest during the draw period. Interest rates usually start around 7.5% to 9%, but they can climb up to 60% with some lenders. Once the draw period is over, you’ll need to pay back what you owe, but you might be able to renew your line of credit for continued access.

Pros:

• Helps with cash flow

• Easier to qualify for than some loans

• Builds a relationship with your lender

• Can help build your own business credit

• Reusable as you repay

Cons:

• May come with extra fees not found in other business loans

• Interest rates can be higher than some loans

• Short repayment periods

• No business credit card rewards

• Draw period limits how long you can spend the funds

Equipment financing

If you’re eyeing some new equipment, like a high-tech coffee machine or more advanced POS software, this loan is tailored just for that. You borrow specifically for the equipment and pay it off over time.

How much you can borrow depends on what you’re buying, but most banks and online lenders are pretty flexible. You might be able to cover the full cost of your equipment with this type of loan. Repayment usually happens in fixed monthly installments, though some lenders might let you pay quarterly or annually.

Interest rates are influenced by your business’s finances, revenue, and personal credit history, as well as the equipment itself. The good news? Since the equipment secures the loan, interest rates are often lower compared to unsecured loans.

Pros:

• Fast funding when you need it

• No need for additional collateral

• Flexible repayment terms

Cons:

• Can only be used for equipment

• Might require a down payment

• Larger loan amounts can mean higher monthly payments

• The loan term could outlast the equipment’s useful life

TIP: Not sure a loan is the right fit? Explore other options like personal loans, angel investors, crowdfunding, or small business grants. We've got a complete guide on small business financing options. Read it to learn more about what some other business owners are doing, other small business financing options and how to get a startup business loan with no money. And, for first-time business owner loans, research lenders who specialize in helping startups or small businesses.

2. Eligibility and business loan requirements

Alright, time to get into what you’ll need to qualify for a business loan. Here’s the rundown on the key stuff:

Credit score

Your personal and business credit score are a big deal. Most lenders prefer a score of 680 or higher, but lower scores aren’t a dealbreaker—you might just face higher rates. If you’re wondering how to get a business loan with bad credit, consider SBA loans or online lenders that specialize in working with lower scores.

Business plan

This is your loan’s résumé. Outline what your business does, your goals, and how you’ll use the money. Include details about your target market, competitors, and growth strategies. Don’t forget to include key sections like financial projections, a term sheet, and an expense sheet.

Financial projections

Lenders want to see that you’re not just dreaming big but also planning sensibly. Financial projections include forecasts of your revenue, expenses, and profits over the next few years. These should be based on solid data and realistic assumptions. They help SBA lenders understand your business’s future cash flow and ensure you’ll be able to handle the loan payments. Basically, they want to see that your business is heading in a positive direction and can support the extra debt. Having an updated expense sheet can also help your case.

Collateral information

Collateral is like a safety net for lenders. It’s something valuable you offer as security for the loan. If you’re taking out a secured loan, you’ll need to provide details on what you’re using as collateral. This could be anything from equipment and real estate to inventory. If you default on the loan, the lender can claim the collateral to recover their money. Providing collateral can make it easier to secure a loan and may also get you better terms.

So, before you hit up those lenders, make sure your credit score is in good shape, your business plan is rock-solid, your financial projections are detailed and realistic, and you have collateral ready if needed. With these elements in place, you’ll be in a strong position to get the funding you need.

3. Four steps to apply for a business loan

Now that you’ve got a handle on the types of loans out there, it's time to dive into the loan application process. Here’s your game plan:

1. Identify your loan needs 

First things first: figure out what you actually need the cash for (you don’t want to be drowning in debt for no reason). Whether it’s buying equipment, covering day-to-day expenses, or expanding your business empire, know your goal. Be specific—this will help you choose the best business loan. Small business loans (including the legendary SBA loans) are great for most business needs.

2. Research and compare lenders

Check out banks, online lenders, and credit unions. Compare rates, terms, and fees to find the best fit. Consider reaching out to venture capital firms or investment programs for additional funding options. The best lenders offer transparent terms and cater to specific needs, such as accounting solutions for business finances or lenders specializing in loans for startups and small businesses.

3. Gather financial information

Time to get your paperwork together! You’ll need to show lenders that your business is worth the risk. Have your business plan, financial projections, and revenue numbers ready. They’ll want to know all about your business’s health, so be prepared to flaunt those numbers (think annual revenue, profit margins, and expenses). If you’ve got business assets or collateral (hello, equipment or real estate), mention that too—it can make lenders more likely to lend you money.

4. Submit the loan application

Once you’ve done all the prep work, it’s showtime. Submit your business loan application and cross your fingers. Some lenders (especially those offering SBA guaranteed loans) take a little longer to approve, so be patient. If all goes well, you'll be signing that loan agreement and getting the funds to fuel your next big business move in no time!

Now, sit back and wait for the lender to make their move.

Tips to maximize your loan approval chances

So, you’ve done your research, got your docs ready, and now it’s time to really seal the deal. Here are some quick tips to boost your chances of getting that loan approved and keeping your business dreams alive.

Improve credit score

Lenders love a good credit score—it’s like the golden ticket of the loan world. If your personal credit score or business credit score isn’t quite where it should be, take some time to boost it before applying. Pay off debts, reduce credit card balances, and make sure there are no errors on your credit report (you’d be surprised how often this happens). The higher your score, the better the interest rates and terms you’ll snag!

Prepare a strong business plan 

A killer business plan can be the difference between a yes and a no. It’s your chance to show lenders you know what you’re doing and how the loan will help your business grow. Be clear about your business needs, how you plan to spend the money, and—most importantly—how you’ll pay it back. Lenders want to see that you've got your act together, so make sure your plan is tight and leaves no room for doubt.

Create a clear cash flow statement 

Your cash flow statement is basically the blueprint of your business’s finances. It shows lenders how much money is coming in and going out, which helps them decide if you’re a safe bet. A clear, detailed cash flow statement makes it easy for lenders to see you can handle monthly payments (because no one wants to lend money to a business that can’t keep up with bills). Plus, it gives you a better understanding of your own financials—win-win!

TIP: If you're unsure about what a cash flow statement is, check out our how to make a cash flow statement guide for a step-by-step breakdown that simplifies the process and helps you get a clear picture of your business's finances.

Understand legal responsibilities

Be aware of any legal obligations tied to your loan or business when you apply for business loans, especially when working with banking institutions or preparing loan terms. Consult a professional if needed.

Fast-Track your growth with Epos Now Capital

Looking for a way to boost your business without all the red tape? Say hello to Epos Now Capital! Whether you need to invest in marketing, manage your cash flow, or just tackle an unexpected expense, this financing solution has your back—offering small and medium-sized enterprises (SMEs) up to $1 million in funding.

No complicated paperwork, no hidden fees, and best of all, no fixed monthly payments. You only repay when your customers pay you. Easy, right?

Why Epos Now Capital?

• Financing from $1,000 to $1,000,000

• No interest, no early repayment fees

• Cash in less than 48 hours

• Payments match your cash flow

If you're an Epos Now customer, you’re already halfway there! No need to switch payment providers, and best of all, there's no need for a business plan. Just apply, get your cash, and keep your business rolling.